Thank you for sharing!

Your article was successfully shared with the contacts you provided.
Click here for the full text of this decision FACTS:Robert A. and Natalie Bert Nickell each had accounts with CGM, formerly known as Salomon Smith Barney, Inc. In connection with their accounts, the Nickells signed agreements containing arbitration clauses. Based on research reports issued by a CGM analyst, the Nickells invested a substantial amount of money in WorldCom Inc. in 2000 and 2001. Subsequently, WorldCom filed for bankruptcy. On April 23, 2004, the Nickells filed a suit against CGM alleging claims for fraud, breach of fiduciary duty, negligence, gross negligence, negligent misrepresentation, and violations of the Texas Securities Act. At the time the Nickells filed their lawsuit, WorldCom had emerged from bankruptcy. On July 9, 2004, CGM removed the case to the United States District Court for the Northern District of Texas on the ground that it was related to the WorldCom bankruptcy proceedings. The Nickells filed a motion to remand the case back to state court on August 9, 2004. CGM then moved to transfer the case to the United States District Court for the Southern District of New York to the multidistrict litigation court. CGM filed a letter with the Judicial Panel on Multidistrict Litigation (JPML) requesting that this case be treated as a “tag-along” action to the multidistrict litigation proceedings involving WorldCom. The JPML granted CGM’s request and issued a final transfer order on December 6, 2004. In the MDL court, the Nickells responded to the MDL court’s order to show cause why certain remand opinions do not require denying the Nickells’ motion to remand for lack of subject matter jurisdiction. The MDL court requested CGM to also file a response to the remand issue. Instead of filing a response to show remand was improper, CGM filed an agreed order stipulating to a remand back to state court. On February 14, 2005, the New York federal court signed the agreed remand order. Once back in state court, CGM filed a motion to compel arbitration under both the FAA and TAA. Following a hearing, the trial court denied the motion. CGM filed a petition for writ of mandamus and an interlocutory appeal of the denial of its motion to compel arbitration. The court consolidated the two proceedings into one cause number. HOLDING:Denied and dismissed. The contract in this case involved the sale of securities and interstate commerce. Accordingly, the Federal Arbitration Act governs this case to the exclusion of the Texas Arbitration Act. CGM contends the trial court erred in denying its motion to compel arbitration. In their response to CGM’s motion to compel, the Nickells alleged that CGM waived its right to arbitration by removing the case to federal court and then transferring it to the MDL court. By making express statements of its desire for a judicial forum, CGM expressly waived its right to arbitration. These statements were made in a letter CGM sent to the JPML requesting that this case be transferred to the MDL court as a “tag-along” action to the WorldCom litigation; CGM’s reply to the Nickells’ response to the motion to stay proceedings pending an order on its motion to transfer to the MDL court; CGM’s brief in opposition to the Nickells’ motion to remand; and CGM’s memorandum of law in opposition to the Nickells’ request to vacate the transfer order. CGM chose to resolve the dispute in a judicial forum. Instead of promptly moving for arbitration, CGM first removed the case to federal court and then sought transfer to the MDL court for purposes of adjudicating the case. “Although removal related conduct alone does not constitute waiver, removal for the stated purpose of pursuing litigation does constitute waiver. We hold that CGM expressly waived its right to arbitration by seeking to litigate the case in the MDL court, a judicial forum. In so holding, we rely not solely upon CGM’s act of removing the case to federal court and then transferring it to the MDL court, but primarily upon its written explanations for the removal and transfer. CGM expressly stated its desire to pursue the case in a judicial forum.” OPINION:O’Neill, J.; Morris, O’Neill and Mazzant, J.J.

Want to continue reading?
Become a Free ALM Digital Reader.

Benefits of a Digital Membership:

  • Free access to 1 article* every 30 days
  • Access to the entire ALM network of websites
  • Unlimited access to the ALM suite of newsletters
  • Build custom alerts on any search topic of your choosing
  • Search by a wide range of topics

*May exclude premium content
Already have an account?

Reprints & Licensing
Mentioned in a Law.com story?

License our industry-leading legal content to extend your thought leadership and build your brand.


ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.